/ 17 February 2021

Small business owners closing shop and feeling the financial squeeze

Tax Relief Favours Small Business

At the beginning of the lockdown, the government embarked on the difficult task of simultaneously protecting lives and livelihoods during the pandemic, but recent data shows that businesses are still folding. 

In January, StatsSA announced that the overall number of companies that have been liquidated increased by 20.5% in the fourth quarter of 2020 compared to the same period in 2019.

This decline has resulted in a 14.2% year-on-year increase in the number of liquidations. The list of companies that are intending to shut their doors permanently is also growing.

One of the casualties has been the transport company Unitrans Passenger’s Greyhound buses, which will cease to operate this month after 37 years. The company will also close its Citiliner bus service. Unitrans Passenger said it has been operating in a challenging environment, now exacerbated by Covid-19.

Last year, independent media company Associated Media Publishing (AMP) shut down, resulting in the end of publications such as Cosmopolitan and House & Leisure. In addition, Media24 also closed some of its publications.

Meanwhile, the travel restrictions caused Flight Centre, one of South Africa’s largest travel companies, to close 40% of its stores. Then, in January, Musica announced that it would also stop trading permanently. 

FinFind’s survey found that 42% of small, medium and micro-enterprises (SMMEs) closed during the first five months of the 2020 lockdown. The company, which assists businesses to find funding, surveyed 15 000 SMMEs across all sectors.
The companies that were most significantly impacted were in construction, food and beverage and hospitality. 

This has had a ripple effect on jobs. The Commission for conciliation, mediation and arbitration (CCMA) told the Mail & Guardian that between 1 April and 31 December 2020, it had received 985 large-scale retrenchment referrals compared to the 555 it saw in the same period of 2019.

This will add to the already high unemployment rate of 30.8%. 

Companies continue to struggle

Elzabe Zietsman’s only birthday wish for her 60th was to sell her guest house.
“Letting go of that burden will mean that I can just breathe. So that’s my big wish. It must have been around August or September when I realised that I am not going to be able to save it and carry on,” Zietsman told the M&G.

Zietsies guest house in Brixton, Johannesburg, has been operating for 15 years.
Covid-19 hit all Zietsman’s income streams — the guest house, its private dining room as  well as her work as an actress and cabaret singer.

“It was an already tough two years before the pandemic struck. So by the time it hit, I had no reserves. It’s been a daily battle.”

Zietsman says she is usually able to drag herself out of a tight corner. “But, yoh, it felt like I was completely overwhelmed, and I am not going to be able to get out of this dark hole at all.”

She applied for all the relief she was able to, but the R50 000 she received from the tourism department was only enough to cover her municipal bills for her lodge for three months.

Zietsman’s staff received Unemployment Insurance Fund payments, but now, with that relief having dried up, she can no longer pay them.

“Now it’s almost worse for me than it was with the first lockdown. Because until now, I managed to fight to stay standing. But now there is no relief anymore. There’s nothing.”

Major loss

In August last year entrepreneur Sidwell Phutheho had to close down his Anat restaurant franchisee in Melrose, Johannesburg. 

Phutheho could not afford to pay rent, staff or service franchise fees. Twelve people lost their jobs.

“We lost a great deal of money. In fact, all our investment into the franchise, as we signed a five-year contract,” he said, estimating a total loss of R2.5-million. 

Meanwhile, Phutheho’s other business, a lodge called 63-on-Nyale in Kameeldrift East, Pretoria, is also on its last legs. 

He said that the government did not do enough, although he understands that they did not expect that the world would be hit by an ongoing pandemic. However, he thinks the government used a blanket approach when implementing lockdown, which affected businesses differently. 

“We don’t see a recovery of our losses. Though alcohol is a major contributor in the hospitality and restaurant industry, it could have been regulated based on the size of the establishments, locations, operating hours, events permits, high-risk areas etcetera … but not a total shutdown,” he said.

Phutheho said that the government needs to look at a holistic approach when assisting small businesses. Besides money, they also need new technology, marketing and access to new markets.

Postponement of the inevitable 

Kate Shepherd is a founding owner of a design and build innovation company, Something Different based in Cape Town and focused on creating bespoke experiences for guests. 

Shepherd started seeing a decline in business a year ago, because her company mostly serves international clients.

After being in the business for 15 years, Shepherd knows that the beginning of the year is usually the busiest for them. She told the M&G that based on her bookings for 2020: “It was the busiest year we have had so far, it was an exciting year, and it was looking great.”

But by mid-February, 90% of her bookings were moved to June, then to September and November.

She said no one had paid the cancellation fees because they were not cancelling; they were postponing, so the company could not collect their cancellation fees. 

Needing R2-million a month to stay open, which she did not have access to, she decided to liquidate.

“With business rescue, you need to prove you will have income in the next six months and I cannot do that. The only way was to shut down and come back the next year.”

More than 80 jobs, both permanent and freelance, were lost.

Try again

Chef Miya Herold closed his Cape Town-based pop-up restaurant business Kujenga Chefs because it relied heavily on demand from the tourists who usually visit the country.

“Since the hard lockdown, we couldn’t get any new bookings. All the bookings we had had to be cancelled, and we had to refund clients. I had to let go of my junior chefs because I couldn’t keep paying them.”

Herold was kicked out of his apartment and now has to stay in “a not-so-friendly neighbourhood” away from his children.

He applied for government relief but didn’t manage to get any.
“I lost big time financially. I had to sell some of my assets … I had to sell some of the equipment that I had just to put food on the table.”

He is in the process of trying to reopen his chef business, but this has been difficult under the current restrictions and without the equipment he had before the lockdown.Closing his business, and facing the financial pressures that came with that was scary, Herold says.

“We just have to try again. We are hoping that things are going to get better. But with the extended lockdowns and curfew times, you can’t really get the business going.”